The long and short of it

One question I ask as many investors as I can relates to time horizons: How can you really be a long-term investor when everything is so uncertain?

The obvious – and arguably correct – answer is to look at real-world themes. Demographic change, technological developments and climate change are three huge multi-year, even multi-decade, issues that investors must monitor closely if they are to be true long-term stewards of capital.

But for every opportunity there is a hurdle, and often more than one. US president Donald Trump is the latest for Dutch pension funds (see p7). A month or two of volatility reportedly caused by trade-war rhetoric can have serious consequences for Dutch schemes and their pensioners.

ABP and PFZW, the country’s two largest schemes, are both struggling to hit funding targets to begin paying pensioners inflation-linked uplifts, and they aren’t the only ones. Long-term investing is of little interest to Dutch pensioners if their monthly pension income is cut.

Brexit is another hurdle. As trade body representatives explain, while tentative agreements are gradually emerging from the UK-EU negotiations, many companies are struggling to see more than a few months into the future. This has an effect on the ability of pension funds to assess their sponsor’s covenant strength.

One of this issue’s best examples of barriers to long-term thinking comes from Spain. The country is in real need of not only reforms to its system but a reassessment of its attitude to pension saving in general. Clinging desperately to the status quo – high state pensions and low take-up of occupational pensions – may win votes at the next election but it will betray generations of younger Spaniards.

For its importance, sometimes long-term planning can only be done one step at a time.